Social media giant Twitter Inc (NYSE:TWTR) is having a bittersweet moment, experiencing increasing popularity among users and financial woes at the same time. Along with growth in revenues, the firm has had to cut jobs and products to please Wall Street expectations of more profitability. Also worrying are forecasts of a deceleration in its user base, and concerns over trolling and harassment in tweets. These issues have reportedly turned off potential suitors like Google, Walt Disney & Co. and Salesforce.com in recent months.
Listen to the podcast:
Ironically, Twitter has never been more influential, says Wharton professor of legal studies and business ethics Kevin Werbach. He points to the current U.S. presidential campaign, and notes, “I shudder to say it, but there would be no Donald Trump if it were not for Twitter.” (Twitter claims the three presidential debates generated an average of 3 billion Tweet impressions.) Twitter is central to every political campaign these days, he adds. At the same time, its survival is threatened because of its finances.
A Look Back At Warren Buffett’s Best and Worst Oil & Gas Investments
Warren Buffett is perhaps best known for his large investments in some of the world's most recognizable brands, companies like Coca-Cola, American Express and Apple. Q1 2020 hedge fund letters, conferences and more Companies that fit into this bracket seem to fall squarely within his circle of competence. They sell a product that's easy to Read More
“Twitter has to figure out what kind of a social media platform it wants to be,” says Jennifer Golbeck, director of the Social Intelligence Lab and professor of information studies at the University of Maryland, and author of the book Social Media Investigation: A Hands-on Approach. “[Does Twitter] want to become one of the social media companies that see big growth year over year like Facebook, or should it accept that the size of its user base will stay roughly at current levels?”
Werbach and Golbeck discussed Twitter’s challenges and how it could address them on the [email protected] show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
Tucked away in Twitter’s third-quarter results announcement last week was its move to lay off 350 staffers, or 9% of its workforce; later in the day it also announced the discontinuation of its mobile video-sharing app, Vine. Third-quarter revenues of $616 million were up 8% over the year-ago quarter, and its monthly active users had grown to 317 million by September-end from 313 million a month earlier. It had also narrowed its losses in the latest quarter to $103 million from $132 million in the year-ago quarter.
Problems to Address
According to Golbeck, Twitter’s main problem is its refusal to address users’ complaints of trolling and harassment. “They don’t know how to make themselves more attractive; they don’t want to address that problem for some reason.” The layoffs and dropping Vine are good moves, she says, but Twitter has to first remedy its trolling and harassment problems to make itself more attractive to suitors.
Werbach says that Twitter is “in a bind” because the trolls are the most active users. Twitter and its CEO Jack Dorsey “do care about the harassment and don’t want to [dismiss it],” he notes. “But when they look at their numbers, they realize that if they clamp down on these users, that will get in the way of what the markets are pushing them for, which is growth, growth, growth.”
Twitter also doesn’t want to go the route that Facebook and some other sites have taken in requiring users to use their real names, “because they have such a commitment to the ability to have free and anonymous speech,” says Werbach. “It’s a frustrating position that they are in, but they have to decide which side they want to be on.”
In Search of an Identity
Twitter has to find its true calling amid all those conflicting signals, according to Golbeck. While Wall Street has been pushing Twitter for growth, its user numbers have been almost stagnant, she says. She notes that Twitter is “a viable company” at its current size and user base. “They haven’t accepted that and are appealing more to Wall Street’s expectations,” she adds. Twitter’s user base will grow only 2% this year instead of the 8% forecast earlier by eMarketer, a digital technology research services firm.
“I shudder to say it, but there would be no Donald Trump if it were not for Twitter.” –Kevin Werbach
Twitter has two main features, as Werbach sees it. One, he says, is “targeted broadcast communication,” which is useful for people with a large number of followers, as well as celebrities and politicians who want to connect directly with their supporters. The other attraction of Twitter is that it is live and real-time, and is heavily used at events like concerts and sports games. “When an event happens, when there is an earthquake, when the Cubs win the World Series, you can have people come together and all commenting on Twitter in a way that you really can’t get with any other platform,” Werbach says.
Some of Twitter’s challenges come from what Facebook and others are doing with live video streams, which in some ways cuts into that unique aspect of Twitter. Twitter has tried to do the same with its Moments and Periscope features, but they are not unique, he adds. The now-discontinued Vine mobile app allowed sharing of six-second videos; Werbach feels it was “not synergistic” with Twitter. The Periscope live-streaming app, however, has gained in popularity, Twitter claims in its latest results announcement.
Golbeck points out that Twitter has “a broadcast feel,” although it doesn’t have the privacy features of Facebook. “It gives you this intermediate space between a blog or an email like a straight-up broadcast medium that also allows for interaction,” she says. “They need to embrace this really powerful niche they have and focus on who they can attract … as an influence in those spaces.”
“Twitter has to figure out what kind of a social media platform it wants to be.” –Jennifer Golbeck
Looking Back, Looking Forward
Now that Twitter faces pressure from Wall Street investors to continuously keep growing revenues and user count, some wonder if going public three years ago was the best decision. Werbach recalls that Twitter went public on the promise of growth. In hindsight, he says Twitter should have looked harder at whether to go public. “The challenge is when you are a company like that, so many of your employees and the investors are tied up in monetizing with that exit [of an IPO],” he says. “Then, when you do the IPO, you’ve got to keep growing. We’ve seen a few companies like Google and Facebook do that successfully, but not every company is destined to be on that path.”
According to Werbach, the best option going forward for Twitter may be for it to be acquired “not as something they can monetize as a growth opportunity but something that’s a truly valuable and important piece of the information landscape.” That acquirer has to be “someone strategic would be in a position to address the trolling and harassment issues,” he adds. “I don’t think they can do it until they decide what their business model is.” Golbeck says she doesn’t expect Twitter to be attractive to any suitors — it must do something that goes beyond the Vine closure and layoffs.
“Twitter is at a point right now where they are not in need of finding another product,” says Werbach. “They are in need of finding what their core product is and how to grow that.”